Liquid Expat Mortgages examines what effect the Bank of England’s base rate rise will have on those holding or looking to get a UK expat or foreign national buy-to-let mortgage.
The Bank of England’s Base Rate Rise.
The Bank of England has increased its base rate for the second time in three months (first to 0.25% and then to 0.5% on the most recent increase). The reason for the rise in interest rates is to do with inflation as the Monetary Policy Committee uses interest rates to control inflation and keep it at 2%. With inflation reaching a 30-year high of 5.4% and predicted to rise further to over 7% by April, a rise in interest rates was inevitable. Further rises are also expected as the Bank of England has forecast that the base rate needs to rise to 1.5% by the middle of 2023 in order to mitigate the impact of inflation. However, the Bank of England are also expected to lower the base rate to 1.4% in Q1 of 2024.
The rise in interest rates means that anyone paying a standard variable rate on their mortgage will notice immediate rises in their monthly costs. However, the temporary nature of the Bank of England’s base rate rise means that mortgage rates will likely remain low when compared to other historic rates. ‘There will certainly be a reluctance for lenders to push up rates massively’ says Stuart Marshall of Liquid Expat Mortgages. ‘What borrowers need to remember is that mortgage lending is a business and lenders will still need to entice new customers. One way of doing this will be to make sure that the base rate rises are not passed onto the consumer.’
Rising Interest Rates and the UK Expat or Foreign National Mortgage.
‘What’s really interesting about the rise in the Bank of England’s base rate for expats is how lenders are responding’ says Stuart Marshall. ‘In fact, a number of expat and foreign national lenders are cutting expat mortgage rates and reducing administration fees. This is all to do with the acceptable margins on a loan for lenders. Since the record low base rates in the UK, banks have taken the opportunity to increase their margins. For reference, before the 2008 financial crisis, the aim for lenders was to have a margin of anywhere between 0.75% and 1.25% over the UK base rate. However, lenders are typically achieving almost three times this level. What this means is that lenders have the ability to trim their margins in response to the Bank of England’s base rate rise in order to entice customers in a competitive marketplace. So, while the base rate is rising, the impact for those looking to get a UK expat or foreign national buy-to-let mortgage are likely to be marginal as lenders try to remain competitive.’
Changing Landscape Providing Opportunities for UK Expat and Foreign National Investors.
‘Another positive for those looking to use a UK expat or foreign national mortgage in the current marketplace is the effect of inflation and the rising interest rates on domestic buyers. The rising cost of living in the UK is sure to deter domestic buyers from moving as uncertainty begins to creep into the marketplace. Further, the rising interest rates are also likely to act as a deterrent to first-time buyers. This weakening of domestic buying power will eventually lead to a softening of demand and, consequently, lower prices. These factors will all create opportunities for UK expat and foreign national buyers in the marketplace and add to the numbers of people staying in the rental market, which will continue to place upwards pressure on rental prices.’
What Does the Base Rate Rise Mean for Existing UK Expat and Foreign National Mortgage Holders?
‘Existing UK expat and foreign national buy-to-let mortgage holders on standard variable rates might feel the effects of the base rate rise more keenly. With the rise, it might be worth looking at the re-mortgaging options available. With new products constantly being made available for UK expats and foreign nationals, there is likely a greater range of choice available compared to when the loan was initially taken. Further, UK expats and foreign nationals that have owned the property for a number of years will benefit from the rise in house prices and the increased equity they have built up in their property, meaning they can re-mortgage with a lower LTV. With the recent interest rate hikes and the near inevitability of further rises in the future, locking in a preferential fixed rate for a number of years is a great option for many UK expat and foreign national landlords.’
Liquid Expat Mortgages
Unit F2, Waterfold Business Park,
Bury BL9 7BR
Phone: 0161 871 1216
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